Tax mistake could cost Britons up to £50billion as HMRC hits households with 'hefty' fines

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Britons are being reminded to take advantage of their tax-free allowance or risk losing more hard-earned cash to HMRC

Across the UK, residents stand to collectively forfeit as much as £50billion between now and the close of the tax year, purely because they fail to make use of allowances already available to them.

According to research highlighted by Michele Tieghi, a financial expert and founder of psyfi money, the typical British taxpayer could be leaving up to £1,900 on the table before the end of March.

Ms Tieghi has outlined five specific tax-free allowances that people still have ample opportunity to take advantage of, even at this stage in the financial year.

These cover ISAs, capital gains tax (CGT), dividends, personal savings and marriage allowance, each offering meaningful potential savings that many households are simply overlooking.

The ISA allowance permits individuals to deposit up to £20,000 annually into cash ISAs, stocks and shares ISAs, or a combination, with all interest, dividends and capital gains entirely exempt from tax.

A basic rate taxpayer could save between £130 and £260, whilst higher rate taxpayers might keep between £260 and £520 that would otherwise go to HMRC. Notably, this £20,000 threshold will fall to £12,000 for those under 65 from April 6, 2027.

Meanwhile, the CGT allowance enables people to realise up to £3,000 in profit from selling assets such as shares or non-primary residential property without paying any tax.

Without this exemption, basic rate taxpayers would face an 18 per cent charge — amounting to £540 — while higher rate taxpayers would owe £720 at 24 per cent.

For those holding shares, the dividend allowance provides up to £500 in tax-free dividend income each year, though this figure has been significantly reduced in recent times.

The personal savings allowance shields a portion of interest earned on savings from taxation. Those on the basic rate receive a £1,000 tax-free allowance, while higher rate taxpayers get £500, both saving £200 in practice.

Additional rate taxpayers receive no allowance whatsoever. Married couples and civil partners can also benefit by transferring 10 per cent of an unused personal allowance, worth £1,260, to their spouse, cutting the recipient's annual tax bill by up to £252.

With the cost of living crisis continuing to squeeze household budgets, making the most of these allowances has become particularly pressing.

As the colder months approach, energy bills and other expenses are set to rise, making every pound saved through smarter tax planning all the more valuable.

Ms Tieghi said: "This is even more important at the moment, due to the ongoing cost of living crisis.

"We’re about to head into the colder months of the year, when bills will become more expensive. Being more tax-wise could help Brits offset these hefty costs.

She noted that thousands of pounds are going unclaimed each year by Britons who simply are not aware of or not acting on the tax-free entitlements at their disposal.